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How do you perceive our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Courts

In the modern era, international firms, and the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies operating from this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation constitute not real financial harm but compensation the panel members determine the company could potentially have made. The state may have to drop the legislation. It is discouraged from passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as companies take cues from each other, and investment funds fund legal actions for a share of a share of the takings. The outcome? Sovereignty and democratic governance are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions enacted by parliaments is that this clause has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the senior court. The judge determined that schemes to open the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on national carbon targets. The new government later cancelled the licence the previous administration had issued. Currently, this legal outcome faces being overturned by an offshore tribunal answering to no one but the corporations bringing the case.

During August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the United States was established to hear it.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no idea how much this might be. Who is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The government makes a decision, the domestic court supports it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it appears probable that he may employ the arbitration process to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that these events were not possible. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter described campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That threat has come to pass. Recently, oil and gas and extraction companies have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP